NRB to withdraws another Rs 5 billion
With deposits rising steadily but loan demand remaining weak, banks and financial institutions have accumulated more funds than they can lend.
KATHMANDU: Nepal Rastra Bank (NRB) has announced plans to withdraw Rs 5 billion from the financial market today (Wednesday) to manage excess liquidity in the banking and financial institutions.
The central bank stated that the liquidity reduction is necessary as the previous injection has matured, and the financial system currently faces a liquidity surplus.
With deposits rising steadily but loan demand remaining weak, banks and financial institutions have accumulated more funds than they can lend.
To address this, NRB will utilize deposit collection instruments to withdraw the amount for a 21-day tenure.
The decision comes after the interbank interest rate fell below 3 percent, prompting the central bank to intervene.
According to current regulations, NRB withdraws liquidity when the interbank rate drops below 3 percent and injects liquidity if the rate exceeds 6.5 percent.
NRB has invited bids from banks and financial institutions to purchase the deposit collection instruments until 3 PM today through an online bidding process.
Bidders can participate in multiples of Rs 10 million and increments of Rs 5 million, ensuring no fractional shares are involved.
The bidding will be conducted based on interest rates, allowing for multiple bids with different rates. Only banks and financial institutions classified as ‘A,’ ‘B,’ and ‘C’ are eligible to participate. The purchased instruments can also be used as collateral with other financial institutions.
